Understanding Hurricane Deductibles And Distinctives About These Policy Exceptions

8 July 2016

Deductibles are a part of almost every homeowner's property insurance policy written, and most property owners have a basic understanding of how they work. However, deductibles in the case of hurricane insurance are quite different than those in most every other policy type. As a result, it is important to understand the distinctives of hurricane insurance deductibles to prevent financial surprises. Below are several unique facets about hurricane insurance deductibles:

Percentage deductibles

For most homeowner's policies, the deductible consists of a flat dollar amount that will be removed from the total property loss suffered in an event. This is also known as a straight or dollar deductible, and amounts are commonly broken into five hundred dollar increments. For example, a typical straight deductible seen in a homeowner's policy is one thousand dollars, though it can be less or even well over that amount.

However, for hurricane deductibles, the amount isn't usually specified as a flat dollar amount. Instead, the deductibles are structured as a percentage of the total home value; this means the deductible may change depending upon the amount of the worth of the home. As an example, in a home worth $200,000 with a percentage deductible of three percent, a homeowner would be responsible for $6,000 of damages and would receive a payout for the additional balance remaining.

Deductible triggers

Another hurricane deductible term that makes a big difference in cost to the homeowner is trigger. Hurricane triggers exist to clearly delineate between a hurricane event and a non-hurricane event, and they provide an evidence of when and where a hurricane deductible will apply. For example, if the National Weather Service issues a hurricane warning for a given county in which the insured resides, that warning might be considered a trigger and create a situation where individuals should seek cover.

One aspect that makes triggers particularly difficult to consider in a universal context is that insurance companies and states have their own sets of regulations. That means what may be a trigger in a New England state, such as a Maine, isn't a trigger inside of a state south of the Mason-Dixon Line, as an example.

It is also helpful to remember that triggers are usually under the control of most insurance companies, though states sometimes do step in to legislate trigger points. Florida, for example, requires that hurricane deductibles be triggered whenever watch or storm warning conditions exist anywhere inside the state.

Scope of coverage

In the case of homeowner's property insurance, it is important to know if hurricane deductibles extend to all kinds of catastrophic weather involving wind. While a tornado isn't considered a hurricane, it may still be a trigger for the hurricane and/or high winds deductible to become activated. These deductibles also require homeowner's to pay a percentage based on value of the home, so keep in mind that that even straight line winds in a thunderstorm can trigger the policy deductible.

In some cases, hail damage may also be included in hurricane and high wind deductibles, especially if an area has been hard hit by hailstorms in the past. These deductibles can also be percentage-based and not straight deductibles.

How to save money

When shopping for insurance, be sure to find a policy that meets your needs by comparing detailed costs hidden inside the details about deductibles. If your current policy contains hurricane deductibles, contact your agent to see if they can help you adjust premium costs based upon the varying deductible amounts. Or, if you are concerned about an inability to pay for property damage in a catastrophic situation, decrease the deductible percentage; this will raise the monthly premium, but it may be worth the extra peace of mind and protection provided.

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